CRM in Banking - Concepts and Cases Edited by : V V Gopal With the opening up of the economy, a number of private sector

banks have joined the fray and are offering a plethora of products and services rechristening themselves as financial boutiques. Knowledge dissemination has been propelled by electronic and mass media campaigns. Todays knowledge savvy consumer is challenging the Indian retail banking industry to redefine itself. In the current competitive scenario for a bank to survive competition, succeed and make profit, there is hardly any option but to learn from and actively respond to consumers needs. Banks offering retail products need to re-orient their strategy from a product-centric to a customercentric focus to attract and retain high net worth individuals (HNI) and profitable customers.

The battle of the banks, for gaining a greater slice of the market share, is taking on a new urgency. In the current falling interest rate scenario, banks are finding it increasingly difficult to meet the high growth expectations. In order to bolster their top lines banks are increasingly looking at newer ways and means of achieving organic growth through strategies that enable acquisition of new customers and retaining the loyalty of existing customers. Success of a banks strategy towards customer acquisition will depend on its ability to develop customer insights and translate these into effective operating models. Ensuring a good customer experience at every customer touch point is the corner stone of a successful growth strategy. A good customer experience will drive customer acquisition and promote customer retention, which translates into increased profits. This in other words is the hallmark of a successful CRM (Customer Relationship Management) strategy. Emphasis on CRM arises on account of the challenges confronting retail managers managing multiple customer touch points which sell the burgeoning complex products with the attendant risks and rewards, and managing to sustain and achieve growth and profits. The entire service industry is now metamorphosed to become customer-specific. The management of customer relationship in the financial service industry demands special focus. Bankers are conscious of the relative costs of acquiring new customers. With the emphasis on delivering results most bankers are resorting to customer grabbing, rather than customer cultivation and creation, with the result that customer churn is the order of the day. Incidentally, bankers are fully aware that replacing customers increases the relative cost of new customer acquisition. Moreover, it is a drain on the existing resources of the bank, which can be better deployed for growth initiatives. Therefore, the challenge for the banks is to retain and deepen the profitability of the existing customer relationships. With the shift from a transaction-centric to a relationship-centric business approach, leveraging customer relationship management (CRM) has become sine qua non. CRM in banking focuses on how companies are adopting the concept to converge people, processes and products more effectively to embark on true relationship banking with the end result of accelerating business momentum. The book CRM in Banking: Concepts and Cases draws the attention of the readers to the various issues of CRM, its effectiveness, application and challenges in the banking industry. The contents of the book are broadly classified into two sections: Concepts and Cases. The section on Concepts accommodates articles, which while introducing the reader to the concept of CRM focus on the implementation and marketing strategies as also the planning of CRM in retail banks. It also underlines the significance of trust in customer relationships. The initiatives of globally renowned banks NatWest, National Australia Bank and the Royal Bank of Canada are discussed in the section on Cases. Concepts The article Strategic Framework for Implementing CRM in Financial Services: An Indian Retail Banking Survey is a curtain raiser to the book. It proposes various ideas and approaches to understand the fundamental marketing motivations driving the CRM trend in banks. The author argues that the integration of CRM and other back-end applications has more to do with culture and process than software and data flow. The article emphatically advocates that any Indian retail bank committed to CRM must continuously invest in its customer relationship activities, for this is the only competitive advantage the bank is left with.

To meet the changing preferences of the customers and to stay ahead of competitors, bankers are bound to provide quality and efficient services. The next article Customer Service in Banks, explains how banks can enhance customer service by leveraging on technology, maintenance of efficient service delivery standards and business process re-engineering. The author elaborates on the importance of displaying service traits by employees such as putting on a pleasing appearance and a good attire. In addition to these, bankers should be keen on cultivating a good relationship with customers through the mechanism of better customer service. No relationship exists for long without mutual trust. Trust is the foundation on which the edifice of any relationship rests. Its significance increases when it comes to financial matters. Importance of Trust in Customer Relationships lays emphasis on building up fiduciary responsibility i.e. trust between customer and financial service providers. The article identifies certain trust-building blocks for establishing and maintaining long-term relationships with the customers such as: offering contractual safeguards like guarantees and warranties and building customer confidence among others. The need for reposing trust as a part of the corporate culture is stressed. The author of Retail Banks: Planning for CRM draws the attention of the readers to the core process of planning for CRM in retail banks. The customers can broadly be classified into two categories i.e., internal customers (employees) and external customers (regular customers). Before embarking on a CRM initiative it is imperative for frontline executives in banks to thoroughly understand their organization structure as well as infrastructure and the product environment. The author also elaborates on the management initiatives for CRM. The article cites that a top-down CRM focused approach that starts with the top management, percolates and permeates all levels of CRM is the need of the present business scenario. The author suggests the introduction of CRM audit by independent teams to identify the existing lacunae. The recommendations of the audit report can be analyzed to plug the loopholes in the CRM strategy of the bank, which can, in the long run, prove to be highly essential and beneficial. The author of Customer Relationship Management in Banking enumerates the business imperatives for a successful CRM strategy. These include: Creating a customer-focused organization and infrastructure; assessing the lifetime value of the customers profitability; maximizing the profitability of each individual customer relationship and understanding how to attract and retain the best customers. While analyzing the implications of these imperatives the author also provides an insight into the various modules which are used to analyze and predict risk and profitability, maximize cross-sell and up-sell initiatives, among others. Managing a good customer relationship certainly makes a difference, asserts the article Banking: CRM Makes the Difference. The author identifies software systems, multiple product database and ineffective tracking as areas which require specific CRM focus. Besides outlining the requirements for CRM implementation such as the setting up of a CRM cell and conducting surveys at periodic intervals to track their effectiveness, the article explains how CRM assists banks in customer identifications, acquisition and retention. The author presents a panoramic view of the Indian banking scenario, which is still in an embryonic stage as far as the CRM domain is considered and recommends CRM implementation to meet the universal banking demands.

It is observed that banks lose their best clients to competitors due to a variety of reasons. The next article Banking on Customer Focus critically analyzes the rationale behind banks losing their best clients to other service providers such as non-brokerage houses and mutual fund houses. The author is of the opinion that inefficient and improper service is a major reason, which results in banks losing their best customers. In order to stem the flow of good customers the author suggests that banks regularly obtain a feedback on the quality of the banks services and conduct an exit survey with the help of a toll-free line of a call center. The article suggests that banks adopt customer relationship building approaches such as responding to complaints instantaneously, analyzing the attrition of clients in a particular product, rating of services across the network of branches, and the creation of a suggestion box to elicit the views and suggestions of their employees. Another dimension of the relationship building exercise is to obtain an electronic feedback from the customers to understand the level of acceptance of existing products as also to develop better products. Banking is a service industry and as such, banks cannot survive if their focus is not customer-specific. The authors of Marketing Strategies Brighten the Future Customer Friendly Banking Services emphasize that bankers need to embrace modern technologies and adopt a modern strategic philosophy, besides maintaining the tempo of operational management of their services. Accordingly, banks need to adopt the right marketing strategies that are more relevant, qualitative and customer-specific to ensure a competitive edge over others in the service industry. CRM in Retail Banking outlines how banks can gain competitive advantage from CRM by becoming low cost players in the market, achieving operational efficiency and maintaining customer loyalty. Ability to predict the products that customers are likely to purchase over a period of time, increased productivity of managerial executives, sales and customer service staff, streamlining of business processes are cited as some of the benefits retail banks obtain by taking recourse to successful management of customer relationship. The success of a CRM plan is dependent on the choice of the software. Towards this end, the article identifies domain expertise, credibility in the market, cost of implementation and the relationship with the vendor as factors on which the vendor selection is based. Financial services firms can be divided into three categories. Banks and insurance companies can be classified as the first generation firms. The 1980s and 1990s witnessed the emergence of a number of second-generation firms such as Boutiques and Large firms catering to the needs of customers who were disenchanted with the services of the first generation firms. The article Financial Convergence: Are you Ready for the Battle? underlines the significance of the convergence of the banks, insurance companies and boutiques to form the third generation firms. To ensure the success of the third generation firms, the article highlights the need for creating a differentiated value proposition. To buttress his point for creation of the third generation firms, the author highlights the global failure of the dotcoms and slowdown in the economy which resulted in investor FUD i.e. fear, uncertainty and doubt. The article elucidates various CRM techniques such as relationship, repeat and referral, which are incorporated in the Consultative Selling process. The author provides an interesting insight into the various modes of selling financial products by describing them as Hunting and Farming. While hunting refers to account management of existing clients as also winning new clients, farming suggests the referral potential of the existing clients. Cases Apart from providing valuable insights into the concept, applications and benefits of CRM, the book

elucidates the CRM initiatives of some well known international banks such as NatWest, National Australia Bank and Royal Bank of Canada. In the case study NatWest the authors narrate how the merger in 1968 between National Provincial and Westminster Banks led to the establishment of National Westminster Bank PLC (NatWest). The case highlights the challenges faced by NatWest due to the emergence of the internet, which resulted in customer attrition as also the problems that arose due to increased focus of the bank on market share rather than customer share and the initiatives taken by the bank in this regard. The case on National Australia Bank traces the history of the bank, which was established in 1958 in the State of Victoria and describes its growth through mergers with both national and international banks. The author illustrates the CRM strategy which involves a five-fold matrix designed by the bank to comprehend the customers financial needs in the areas of: a) Loan funding; b) Risk Management/Insurance; c) Deposits, withdrawals and Transfers; d) Investments; and e) Information. The case also enumerates the benefits reaped by the bank through CRM implementation. The case on Royal Bank of Canada addresses various CRM practices at the bank and narrates how the bank profited through CRM orientation by creating customized products and providing service solutions. The case investigates the steps taken by the bank to build and fortify its CRM capabilities within the realm of customer knowledge. Customer Profitability Measurement, segmentation and modeling (parametric and non-parametric modeling techniques) and customer decision-making capabilities are some of the CRM applications, which are addressed in the case study.